Business leaders have expressed their severe disappointment over the central bank’s decision – announced earlier this month – to cut loan installment payment defer tenure from six months to three months from September 30 this year, and only three days from March 31, 2025.

Industrialists believe that when the new circular comes into effect, classified loans will skyrocket, jeopardising the ease of doing business, reducing foreign currency earnings, and job opportunities, as it will likely hamper the process of opening Letters of Credit (LCs).

To resolve this issue, businesses will speak to the central bank governor, and even consider visiting the Prime Minister’s Office.

The Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) held a meeting on Wednesday to discuss such issues, where participants said most of the industrialists will be loan defaulters due to the central bank decision.

They added that the industries are already in peril due to the ongoing global and domestic economic headwinds, and that is why they are facing trouble paying installments within the existing tenures.

Under such circumstances, how the businesses will meet the central bank’s new policy, industry insiders say. Experts and central bank officials however say the decision has been taken as per the international standard, and it will help reduce classified loans.

The Bangladesh Bank had issued a circular on April 8, changing the definition of classified loans.

According to the new decision, in case any installments or part of installments of a loan is not repaid within three months of the due date, it would be classified and the move will come into effect from September 30 this year.

This tenure will further go down to just three days from March 31, 2025, instead of existing six months, the circular read.

In Wednesday’s meeting, the FBCCI decided to meet the central bank governor to discuss the issue, and if they fail to get positive feedback, they are likely to call on Prime Minister Sheikh Hasina for her intervention, insiders say.

Bangladesh Textile Mills Association (BTMA) President Mohammad Ali Khokon said, “Everyone is suffering from the ongoing economic crisis. Banks also failed to pay us within the time, even some banks are taking up to six months to clear LC payments.”

Amid the situation, we are expecting a business friendly decision from the central bank. But the banking authority has made such a move, which will force businesses to become bankrupt, Khokon, who is also a FBCCI director, told The Business Post.

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Mohammad Hatem said, “If the central bank truly wants to reduce classified loans, we would welcome the decision.

“But the new policy will not help at all except further pushing the classified loan amount up considering the ongoing economic situation.”

According to the central bank data, the country’s default loans stood at Tk 1,45,633 crore at the end of December last year, occupying 9 per cent of the banking sector’s outstanding loans of Tk 16,17,689 crore.

Executive Director of Policy Research Institute of Bangladesh Ahsan H Mansur said, “Up to three months tenure is an internationally accepted practice. The longer the period, the more it is likely for loans to be overdue.

“The businessmen of our country already receive many privileges. The International Monetary Fund (IMF) also wants the tenure to be three months.

BKMEA Executive President Mohammad Hatem said, “If the central bank really wants to reduce classified loans, they should take action against people who took thousands of crores of Taka through scams. They are the real defaulters.”

Back in 2020, the Bangladesh Bank gave special concessions on loan repayments to deal with the adverse impact of Covid-19 pandemic.